Azad Talkies Vs. Income Tax Officer - Court Judgment

Excerpt:
1. this appeal by the assessee has been filed against the order of the cit(a) dt. 15th dec., 2003 and arises out of a penalty levied under section 271(1)(c) of the act vide order dt. 26th sept., 2001 by the ito.2. the facts leading to this appeal are that the assessee had filed return of income by declaring loss of rs. 1,10,711. the ao completed the assessment on an income of rs. 3,19,850 vide order dt. 25th march, 1996. ultimately addition of rs. 1,05,500 was made on account of unexplained deposits standing in the names of partners and an addition of rs. 10,000 on account of an unexplained deposit standing in the name of one creditor, shri ram bilas. this total addition so made on account of unexplained deposit to the tune of rs. 1,15,500 stood confirmed. on these facts, the ao levied penalty of rs. 1,00,000 under section 271(1)(c) of the act, which was confirmed by the learned cit(a) as well.3. i have heard the rival submissions and perused the evidence on record.4. it was submitted by the learned authorised representative that the assessee had filed return of loss and even after the impugned additions, there remained a loss. therefore, according to him during the relevant period, if the return of loss remained loss on computation, the assessee could not be hauled up for penalty under section 271(1)(c) of the act. the learned departmental (authorised) representative has placed reliance on the decision of the asstt. cit v.apsara processors (p) ltd. 5. in addition to the above, it has been submitted by the learned authorised representative that both the ao for levying penalty and the learned cit(a) for confirming the same relied on wrong facts that after computation the assessee was found to have taxable income, i.e., positive income. for that matter he has invited my attention to assessment order where even after assessment the income remained negative.6. on the contrary, the learned departmental representative has placed reliance on the penalty order and the appellate order. he has further stated that the deposits in question were found to be not properly explained and thus it was the main reason for the levy of the penalty in question.7. after considering the rival submissions and the available evidence on record, i am of the considered opinion that the claim of the assessee is quite justified. the ao as well as the learned cit(a) have taken their respective decision on the assumption of wrong facts. the factual fact is that returned loss remained loss even after computation and therefore in view of the above-relied tribunal order (supra) no penalty could be levied for concealment when return of loss ended up in loss.8. lastly, even if the deposits could not be properly explained, this fact in itself would not lead to a conclusion that the assessee had concealed its income. there is no finding on record that the assessee had knowingly concealed its income, rather out of total deposits, a part has been accepted by the authorities as explained. this bench has been consistently taking a view that in case the deposits found in the books of the assessee are not accepted as explained, it cannot in itself lead to attract one of the ingredients of section 271(1)(c) of the act. therefore, for the foregoing reasons, i order to delete/cancel the impugned penalty and accept the appeal.

Judgment:
1. This appeal by the assessee has been filed against the order of the CIT(A) dt. 15th Dec., 2003 and arises out of a penalty levied under Section 271(1)(c) of the Act vide order dt. 26th Sept., 2001 by the ITO.2. The facts leading to this appeal are that the assessee had filed return of income by declaring loss of Rs. 1,10,711. The AO completed the assessment on an income of Rs. 3,19,850 vide order dt. 25th March, 1996. Ultimately addition of Rs. 1,05,500 was made on account of unexplained deposits standing in the names of partners and an addition of Rs. 10,000 on account of an unexplained deposit standing in the name of one creditor, Shri Ram Bilas. This total addition so made on account of unexplained deposit to the tune of Rs. 1,15,500 stood confirmed. On these facts, the AO levied penalty of Rs. 1,00,000 under Section 271(1)(c) of the Act, which was confirmed by the learned CIT(A) as well.

3. I have heard the rival submissions and perused the evidence on record.

4. It was submitted by the learned Authorised Representative that the assessee had filed return of loss and even after the impugned additions, there remained a loss. Therefore, according to him during the relevant period, if the return of loss remained loss on computation, the assessee could not be hauled up for penalty under Section 271(1)(c) of the Act. The learned Departmental (Authorised) Representative has placed reliance on the decision of the Asstt. CIT v.Apsara Processors (P) Ltd. 5. In addition to the above, it has been submitted by the learned Authorised Representative that both the AO for levying penalty and the learned CIT(A) for confirming the same relied on wrong facts that after computation the assessee was found to have taxable income, i.e., positive income. For that matter he has invited my attention to assessment order where even after assessment the income remained negative.

6. On the contrary, the learned Departmental Representative has placed reliance on the penalty order and the appellate order. He has further stated that the deposits in question were found to be not properly explained and thus it was the main reason for the levy of the penalty in question.

7. After considering the rival submissions and the available evidence on record, I am of the considered opinion that the claim of the assessee is quite justified. The AO as well as the learned CIT(A) have taken their respective decision on the assumption of wrong facts. The factual fact is that returned loss remained loss even after computation and therefore in view of the above-relied Tribunal order (supra) no penalty could be levied for concealment when return of loss ended up in loss.

8. Lastly, even if the deposits could not be properly explained, this fact in itself would not lead to a conclusion that the assessee had concealed its income. There is no finding on record that the assessee had knowingly concealed its income, rather out of total deposits, a part has been accepted by the authorities as explained. This Bench has been consistently taking a view that in case the deposits found in the books of the assessee are not accepted as explained, it cannot in itself lead to attract one of the ingredients of Section 271(1)(c) of the Act. Therefore, for the foregoing reasons, I order to delete/cancel the impugned penalty and accept the appeal.